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Pleasantville Board of Education v. New Jersey Department of Education

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


January 13, 2011

PLEASANTVILLE BOARD OF EDUCATION, APPELLANT,
v.
NEW JERSEY DEPARTMENT OF EDUCATION, RESPONDENT.

On appeal from the Decision of the Commissioner of Education.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted November 30, 2010

Before Judges Koblitz and Newman.

Plaintiff, Pleasantville Board of Education (the Board), appeals from the decision by defendant, former Commissioner of Education, Lucille E. Davy (the Commissioner), appointing a fiscal monitor for a term beginning October 1, 2009, through September 30, 2011. We affirm.

The background facts are not in dispute. The Commissioner appointed a fiscal monitor, John Deserable, on March 26, 2007, to the Board pursuant to the School District Fiscal Accountability Act. N.J.S.A. 18A:7A-55 to -60 (SDFAA), effective on or about July 1, 2007. That term was to end on June 30, 2009. The Commissioner then, in a letter of June 23, 2009, appointed an interim fiscal monitor, James Riehman, to serve from July 1, 2009, to September 30, 2009, indicating that a permanent appointment would be made effective October 1, 2009.

In a letter to the Board of September 16, 2009, the Commissioner advised the Board that Mark Ritter would serve as fiscal monitor to the Board from October 1, 2009, through September 30, 2011. In this letter of introduction, the Commissioner briefly described Ritter's qualifications for the position, the improvements in the district "[s]ince the appointment of a State monitor," and the anticipated areas in which Ritter would involve himself in the footsteps of the preceding fiscal monitors.

On September 30, 2009, the day before the effective appointment date, the Board filed a verified petition with the Commissioner seeking to stay the appointment. No accompanying brief was submitted in support of any emergent relief. In a subsequent letter of October 6, 2009, the Commissioner dismissed the petition, indicating that "th[e] matter should have been filed" with the Appellate Division because "review of a final decision of a State administrative agency or officer" was sought. With regard to the stay, the Commissioner pointed out that the criteria of Crowe v. DeGioia, 90 N.J. 126, 132-34 (1982), were not met, and there was "no showing that the district [would] suffer irreparable harm by the continuation of . . . a [fiscal] [m]onitor in the district." According to the Commissioner, there was also no demonstration that the Board would likely be successful on the merits. She pointed out that "the district continues to be eligible for appointment of a State Monitor pursuant to N.J.S.A. 18A:7A-55, based on the 2008 Comprehensive Annual Financial Report (CAFR) filed by the district." The Commissioner did grant some relief to the Board, which had alleged a violation of the provisions of N.J.S.A. 18A:7A-55, by not presenting a plan to address fiscal management and expenditure concerns, by requiring the fiscal monitor to "develop and implement such a plan within [forty-five] days, if one has not already been developed."*fn1

On appeal, the Board raises the following issues for our consideration:

POINT I

THE CONTINUED APPOINTMENT OF A FISCAL MONITOR IN THE PLEASANTVILLE SCHOOL DISTRICT VIOLATED THE PROVISIONS OF N.J.S.A. 18A:7A-55.

POINT II

THE STATE FISCAL MONITORS APPOINTED BY RESPONDENT DAVY TO THE PLEASANTVILLE SCHOOL DISTRICT HAVE FAILED TO COMPLY WITH THEIR DUTIES PURSUANT TO THE SCHOOL DISTRICT FISCAL ACCOUNTABILITY ACT.

POINT III

PETITIONER WILL CONTINUE TO SUFFER IRREPARABLE HARM BY THE PRESENCE OF A FISCAL MONITOR IN THE PLEASANTVILLE SCHOOL DISTRICT.

The Board contends that there was no statutory basis to continue the appointment of a fiscal monitor. The Board alleges that the criteria for a monitor enumerated in N.J.S.A. 18A:7A-55 were not satisfied.

Pursuant to the SDFAA, the Commissioner may appoint a State monitor "to provide direct oversight of a board of education's business operations and personnel matters if . . . two or more of the following circumstances apply to the school district":

(1) the school district ends the fiscal year with a deficit balance as calculated for budgetary purposes in the general fund, special revenue fund, or capital projects fund, with the exception of a capital projects fund deficit caused by the issuance of bond anticipation notes;

(2) the school district receives a qualified opinion by its independent auditor in the annual audit required pursuant to N.J.S.A. 18A:23-1;

(3) the school district receives an adverse, disclaimer, or qualified opinion by its independent auditor under the single audit section for State or federal awards in the annual audit required pursuant to N.J.S.A. 18A:23-1;

(4) the school district receives any audit findings by its independent auditor identified as material weaknesses in internal controls;

(5) the school district fails to develop and implement a plan acceptable to the commissioner or his designee to address a potential or actual deficit balance in the general fund, special revenue fund, or capital projects fund, with the exception of a capital projects fund deficit caused by the issuance of bond anticipation notes;

(6) the school district fails to implement a plan from the prior year which causes any findings from the independent auditor to be repeated;

(7) the school district is required to return federal funds once it is determined that the school district's expenditures are not in compliance with the grant requirements; or

(8) the school district submits the annual audit after the submission date required pursuant to N.J.S.A. 18A:23-1. [N.J.S.A. 18A:7A-55(a).]

The Commissioner may also appoint a State monitor should "the school district receive[] an adverse or a disclaimer of opinion by its independent auditor in the annual audit required pursuant to N.J.S.A. 18A:23-1," or if 2 of the numbered conditions exist.

To address these matters, the Legislature required that State monitors perform the following tasks, which are spelled out in N.J.S.A. 18A:7A-55(b):

(1) oversee the fiscal management and expenditures of school district funds, including, but not limited to, budget reallocations and reductions, approvals of purchase orders, budget transfers, and payment of bills and claims;

(2) oversee the operation and fiscal management of school district facilities, including the development and implementation of recommendations for redistricting and restructuring of schools;

(3) ensure development and implementation of an acceptable plan to address the circumstances set forth in subsection a. of this section which resulted in the appointment of the State monitor. The plan shall include measurable benchmarks and specific activities to address the deficiencies of the school district;

(4) oversee all district staffing, including the ability to hire, promote, and terminate employees;

(5) have authority to override a chief school administrator's action and a vote by the board of education on any of the matters set forth in this subsection, except that all actions of the State monitor shall be subject to the education, labor, and employment laws and regulations, including the "New Jersey Employer-Employee Relations Act," [N.J.S.A. 34:13A-1 to -39], and collective bargaining agreements entered into by the school district;

(6) attend all meetings of the board of education, including closed sessions; and

(7) meet with the board of education on at least a quarterly basis to discuss with the members of the board the past actions of the board which led to the appointment of the State monitor and to provide board members with education and training that address the deficiencies identified in board actions. [N.J.S.A. 18A:7A-55(b).]

The State monitor is required to "provide oversight in the school district until the commissioner determines that all remedial actions required under the plan have been implemented and the necessary local capacity and fiscal controls have been restored to [the] district['s] operations." N.J.S.A. 18A:7A-55(e).

Here, there is no documented record before us of dissatisfaction with the fiscal monitor until the last-minute effort to stay the appointment on September 30, 2009. Moreover, the Commissioner's September 16, 2009, letter of introduction does not read like a final agency decision grounded on the criteria set forth in N.J.S.A. 18A:7A-55, but merely as an introductory letter to the Board to welcome the new appointee. However, once the Commissioner was alerted to the challenge to the continued appointment of a fiscal monitor, she indicated in her letter of October 6, 2009, that the district remained eligible for a monitor based on its 2008 CAFR.

While not contained within the Commissioner's letter because no timely challenge was forthcoming, the Attorney General's brief, based on the findings of the independent auditor, points to "five material weaknesses in the district's internal control[s]" noted in the 2008 CAFR, see N.J.S.A. 18A:7A-55(a)(4), three repeated findings of a failure to implement plans from a prior year's audit in the 2008 CAFR, see N.J.S.A. 18A:7A-55(a)(6), and the late submission of the CAFR, which, the brief notes, citing N.J.S.A. 18A:23-3, was "required to be filed with the office of the Commissioner within five days after the completion deadline, or November 5, 2008," but was not submitted until one week later, on November 12, 2008, see N.J.S.A. 18A:7A-55(a)(8). Since two or more circumstances still existed in the district, these deficiencies rendered the district eligible for the continued appointment of a fiscal monitor. See N.J.S.A. 18A:7A-55.

The Board contends in its reply brief that the Commissioner should have used the CAFR report for 2009 when it was released, which would be more indicative of the conditions existing in the school district at the time of the appointment than the 2008 CAFR, and, while awaiting those results, could have appointed an interim monitor. However, that report was not available at the time that the appointment, effective October 1, 2009, was made. It was, therefore, not arbitrary or unreasonable for the Commissioner to rely on the 2008 CAFR report.

The Board argues, as it did in the verified petition to the Commissioner, that the fiscal monitors failed to comply with N.J.S.A. 18A:7A-55(b)(3) by not developing, presenting, or discussing any type of plan for implementation by the Board to address fiscal management and expenditures within the school district. In response, the Commissioner directed that this be done, if it had not already been done, within forty-five days of the October 6, 2009 letter. Thus, the Board prevailed on this issue and there is no relief to be afforded on appeal. See Cinque v. N.J. Dep't of Corrs., 261 N.J. Super. 242, 243-44 (App. Div. 1993).

Lastly, with regard to the failure to grant emergent relief by staying the effective date of the appointment, no irreparable injury was demonstrated. The $600 per day compensation for the services of the fiscal monitor was not irreparable since it involved only the payment of monies. Moreover, the Board did not even submit a brief in an effort to satisfy the Crowe v. DeGioia, supra, 90 N.J. at 132-34, criteria, which were adequately addressed by the Commissioner. As she noted, no likelihood of success on the merits was even addressed by the Board. The verified petition contained various complaints of dissatisfaction with the prior fiscal monitors, but did not establish that the district was fiscally responsible and not in further need of monitoring. Furthermore, the Board was on notice since the Commissioner's letter of June 23, 2009, when James Riehman was introduced to the Superintendent of Schools and the Board President as an interim choice, that a full-time State monitor would be appointed effective October 1, 2009. Despite having more than three months notice, nothing was done until the day before the effective date of the appointment. It was a consummate example of "too little, too late." The Commissioner properly denied the stay of the appointment.

Affirmed.


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